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Phoenix Health Systems See Cost Increases for Expansion Projects

Thursday, May 29, 2008 General News J E 4
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NASHVILLE, Tenn., May 28 HealthLeaders-InterStudy, aleading provider of healthcare market intelligence, reports that the collapseof the auction-rate securities market is triggering major cost increases forhealth systems that have borrowed money to undertake facility expansions.According to the latest Phoenix Market Overview, problems securing reasonableinterest rates for variable-rate bonds have forced hospitals to refinance.

"Financing for construction projects has recently become far moredifficult in Phoenix as health systems confront the fallout of a deterioratingmarket for auction-rate securities," said Josh Kelley, market analyst forHealthLeaders-InterStudy and author of the report. "By refinancing, the resultis significantly higher costs for capital expenditures that could disruptplans for construction projects."

As of mid 2007, nine new hospitals were planned for construction inArizona, and expansions or renovations were planned at 23 hospitals over thenext five years. The wave of projects is in response to Arizona's shortage ofhospital beds per capita, an area in which the state ranks near the bottomnationally. A study released in 2007 and sponsored by the Arizona Hospital andHealthcare Association found that the state's hospitals planned to undertake$3.3 billion in construction between 2007 and 2011, increasing bed capacity by2,900, or 20 percent. In the southeast Valley alone, existing hospitalsalready have expansion plans to add more than 1,400 beds.

Health systems in metro Phoenix, including Banner Health and CatholicHealthcare West, are being forced to refinance these auction-rate securities,which are long-term bonds whose interest rates are based on auctions heldevery seven, 28 or 35 days, and switch to fixed-rate debt. Health systems witha strong balance sheet, including Banner Health, are riding out the creditcrunch without altering plans for construction projects. But health systems ina weaker financial position may be forced to cut back on capital expenditures.

About Market Overviews

Market Overviews provide a detailed analysis of local healthcare markets,allowing healthcare businesses to plan their local strategies.

About HealthLeaders-InterStudy

HealthLeaders-InterStudy is the authoritative source for managed caredata, analysis, and news. For more information, please visitwww.HealthLeaders-InterStudy.com .

All company, brand, or product names contained in this document may betrademarks or registered trademarks of their respective holders.For more information, contact: Elizabeth Marshall Decision Resources 781-296-2563 emarshall@dresources.com

SOURCE HealthLeaders-InterStudy
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